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Analyst: Wii U a ‘mistake’ for Nintendo — what the company needs to do to recover

If perception is reality, then Nintendo could be in trouble. The company didn’t reveal its hardware sales numbers for January but Gamasutra estimates it’s somewhere around 55,000. That’s a tiny number, and it has the Nintendo doomsayers out proclaiming the end for the Japanese publisher’s home-console business.

One poor month doesn’t break a console, but the perception is that things won’t get any better for the 3-month-old system. It needs games, but even if Nintendo strings together a few hits, how can the Wii U possibly survive the oncoming threat of a new PlayStation and Xbox this year?

“I think they misfired on the Wii U,” Wedbush Securities managing director Michael Pachter told GamesBeat. “It’s just not that different from the other two [existing] consoles, and the gameplay isn’t as unique as the Wii. They made a mistake, it’s something they probably can’t recover from.”

In the same month that Nintendo failed to crack 100,000 Wii U consoles sold, Microsoft proudly sold another 281,000 units of the aged Xbox 360. If you feel like that’s an unfair comparison, then how about this: Through the first three months, Wii U sales are 38 percent lower than the original Wii.

If you don’t remember the launch of Wii, it was nearly impossible to get your hands on one. Had Nintendo kept up with demand, Wii sales would have been much higher. The Wii U is suffering from no such shortage.

“The Wii U sales do look pretty bad,” Endpoint Technologies Associated analyst Roger Kay told GamesBeat. “My sense is that Xbox 360 has the momentum at this point.  Dedicated hardware platforms are hard to maintain.”

What Nintendo needs to do

But Nintendo doesn’t need to outsell Sony or Microsoft to survive, although it would certainly help if the Wii U could keep up with the other hardware on the market. Consoles like the Nintendo 64 and Gamecube failed to outsell its competitors, but Nintendo still turned a profit throughout those hardware generations.

It could do the same this time. But how? Well, with games.

“Great games, unique to the platform, would be a very good start,” Baird analyst Colin Sebastian told GamesBeat.

“Games, games, and more games,” IDC research manager Lewis Ward told GamesBeat. “The relationship between key releases — primarily first-party titles — and hardware sales is especially clear in Nintendo’s case. The sooner they get titles like Pikmin 3 and Wii Fit U on the console side and Pokémon games and titles like Animal Crossing: New Leaf on the 3DS side on store shelves, the better.”

Ward has a point. January was a barren month for Wii U. Perhaps things will pick up again when games start rolling out. That’s Nintendo’s hope. The company held one of its Nintendo Direct streaming-video shows on Jan. 23 to highlight what it has in store for the home console: 3D Mario, The Legend of Zelda: The Wind Waker remake, new Mario Kart.

Pachter doesn’t think that’s going to cut it.

“I think they have made a costly mistake [with the Wii U],” said Pacther. “And their handheld business can’t save them in the face of cannibalization from smartphones and tablets.”

Nintendo wasn’t ready

The Wii took off because it hit the market at the right time. Nintendo was the only company that was ready to offer a wide audience a different way to play games. That’s Nintendo’s core competency. The hardware giant knows how to experiment with game design.

So it makes sense that with the Wii U, it tried again to capture an audience with a new way to play: the GamePad tablet-like controller.

This device enables fresh ideas and gamer-friendly functionality, like playing console games while someone else watches television.

But that’s not what the market is hungry for. Gamers, and perhaps a wider audience, want a different approach to trying and buying games.

Apple has opened everyone’s eyes with the App Store — well, everyone except for Nintendo, Sony, and Microsoft.

Sony and Microsoft are going to throw powerful supercomputers at the market, but the battle over graphics is a dying paradigm.

The winner of the next “console race” is whoever can successfully combine the app store with triple-A gaming.

The Ouya and GameStick Android consoles are evidence that gamers are ready for a different distribution model than the $60 release that’s sustained this industry for so long. Those open Android-based systems are severely underpowered when it comes to visual performance, but Ouya raised more than $8 million on Kickstarter because people just want something different.

Valve is coming with its so-called Steam Box gaming PC for televisions because it knows that this is the right time to do something like that. Valve chief Gabe Newell isn’t even worried about the big three console manufacturers.

Newell is more worried about Apple, which is working on a software development kit that studios can use to create games and apps for the Apple TV.

Meanwhile, Nintendo has a touchscreen controller. I’m not saying Nintendo can’t still get into the game. All I’m saying is that, right now, it’s not even fighting the right battle.


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